Sports Betting

Back in mid-May, the Supreme Court ruled PASPA (Professional and Amateur Sports Protection Act) to be unconstitutional; providing a pathway for legalized sports betting in the United States. The crux of the argument being that PASPA violates individual state’s rights (10th Amendment).

There is now an opportunity for individual states to take advantage of an economic arena that only the state of Nevada has been fully able to reap the benefits of.

What are the next steps for individual states?

If a state wishes to have sports betting in their jurisdiction, they must introduce, and pass, state-specific legislation that will allow a form of sports betting (this is similar to how some states have lotteries, while others do not).  The basis of the legislation will have to address the various types of regulations on sports betting, license distribution, betting access, liability matters and tax structure.

Delaware and New Jersey are the first states capitalizing on this opportunity, with West Virginia, Pennsylvania, and Mississippi on the verge of finalizing legislation. Delaware took its first legal sports wager on June 5, making sports betting available at horse tracks. New Jersey took its first over-the-counter sports betting transaction on June 14 and took in around $16 million worth of bets in the first two weeks of sports betting being legal.

As mentioned, a caveat to recognize is the right tax structure and regulation that will deter people from using illegal sports betting channels. These come in the forms of underground bookies and third party websites. We’re seeing this issue in Pennsylvania, which passed a sports betting law last year, but put forth a $10 million licensing fee and 36% effective tax rate on revenue collected from sports betting. It’s to be seen whether this high cost of doing business will push players back to the underground market.

How far is Illinois from having Sports Betting? 

A report produced by the Gambling Compliance Outlook believes sports betting will come to Illinois within five to seven years. There have been five different sports betting bills introduced this past legislative session, and a number of committee hearings focused on this topic, so sports betting might come sooner than that.

One of those bills, SB 3432, was introduced by Senator Napoleon Harris III.

Some of the highlights of SB 3432 include, but not limited to:

  • 5% tax on gross sports waging revenue
  • Framework for in-person and over the Internet sports wagering platforms
  • Licensing of an interactive sports wagering platform shall have an initial fee of $10,000
  • Annual licensing fee for an interactive sports wagering platform shall be $5,000
  • Restrictions on sporting events individuals can wager on, i.e., youth sporting events
  • Integrity requirements for sports wagering operators
  • Recordkeeping and information sharing
  • An integrity fee of 1% (percentage of the amount being wagered on sports governing body’s sporting events)

If the General Assembly decides to use SB 3432 as the framework for an overall sports betting package, be prepared for some voids to be filled and for the legislation to be expanded to accompany the multiple industry players.

Altogether, there seems to be an appetite for sports betting in Illinois, but there must be a system in place to provide a fair tax structure and preserve the integrity of each game being wagered on.